Southeast Corp Faces PCC Hurdle En Route to Merger Deal
Thursday was the last day members of the $1.6 billion Southeast Corporate Federal Credit Union members could contribute Perpetual Contributed Capital in advance of a planned merger with the $3.7 billion Corporate One Federal Credit Union.
Members of the Tallahassee, Fla.-based corporate must convert or raise $75 million worth of PCC to fulfill their end of the merger deal.
According to a merger update posted on Southeast Corporate’s website, credit unions are required to convert existing Member Capital Shares, and purchase additional PCC if necessary, to meet a requirement of 0.9% of assets.
Southeast Corporate President/CEO Brad Miller declined to share his institution’s progress toward the $75 million goal, but said Wednesday that “things are progressing as expected” and the corporate would publicly release results after members had been informed.
Corporate One President/CEO Lee Butke said Wednesday he was “nothing but pleased” with Southeast Corporate’s progress to date.
Butke also declined to provide any numbers on Southeast, because he said the process of a credit union committing to a capital investment is a timely one, requiring volunteer approval, usually at a monthly board meeting, and the transferring of funds into an escrow account.
“I’m very enthusiastic,” Butke said of Southeast Corporate’s ability to make the goal and the future of the merger. “They have some fence sitters, but we had our own during our own capital raise.”
Should Southeast Corporate not achieve its PCC goal, it doesn’t necessarily kill the merger. Butke stressed that Corporate One’s most important goal is to be well-capitalized and meet NCUA capital requirements before the merger, and be “on track” to meet that goal after the merger is complete. The $75 million is means to that end.
Should Southeast fall short, Butke said, the merger could still proceed at the discretion of Corporate One’s board.
“To merely be adequately capitalized is a very short-sighted goal,” said the leader of the Columbus, Ohio-based corporate. “The agency is going to want us at the well capitalized level, and our members want us to be well capitalized, too.”